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New Guo Wengui Allegations, Finance Crackdown, SOEs And Education-It’s All About The Party-Sinocism 06.19.17

"Sinocism is the Presidential Daily Brief for China hands"- Evan Osnos, New Yorker Correspondent and National Book Award Winner

Good Afternoon. Guo Wengui talked for nearly four hours Friday and threw out many more allegations. His case continues to be exciting, even if most of his claims are so far unverified. The inaugural U.S.-China Diplomatic and Security Dialogue meets Wednesday in DC and I am not betting that the current calm in US-China relations will last much longer.

The Essential Eight

Guo Wengui had another exciting webcast on Friday June 16. All four hours and ten minutes of it are on Youtube-直播：明鏡專訪郭文貴第三期.

Guo’s most explosive allegations were again about Wang Qishan and his wife Yao Mingshan. If some or all of those allegations are true it is damaging to the Communist Party that they are made public, but did the Party Center not already know? Also, I have heard for years that Wang and Yao are actually divorced. If that is true, might that have a mitigating impact for Wang?

Wang Qishan’s last publicized appearance was on May 13. He has disappeared from public view for long periods before, right before resurfacing and announcing the investigation of a big tiger, so the absence this time could be a sign of a problem, or it could not be.

Guo also praised Jiang Zemin and Zeng Qinghong, leading to more speculation that Jiang and Zeng are behind at least some of Guo’s allegations.

During the broadcast Guo claimed he is deciding on an offer of asylum for him and his family from the US government. Really?

Guo also touched on the rumors going around that Ministry of Public Security officials were detained at JFK airport three weeks, traveling undeclared, on their way to chat with Guo in a pre-arranged discussion. If true that is a serious breach of protocol by Beijing.

Youtube and Mingjing were very hard to access during parts of the webcast, and look to have been under attack. Is the US government investigating? This is not the first time that these and other sites have come under attack during Guo’s webcasts. If there is any evidence of Beijing involvement the US government needs to make a swift, forceful and substantive response, beyond a useless demarche. And it should be on the agenda at the upcoming cyber dialogue.

Comment: Global Times attacks Guo Wengui, says he is dealing with his fears by spreading lies. The Party media attacks on Guo seem to be working inside China, I am hearing from more and more people they think Guo is exaggerating, lying and is a crook himself. But if Beijing, working through a special investigative unit set up to manage the Guo mess, is sending undercover security officials to the US and attacking key parts of American Internet infrastructure to shut Guo up then outsiders are right to pay attention to Guo, as Beijing is clearly distressed by his actions.

A procuratorate in Dalian city in northeastern China on Friday filed a public lawsuit against several executives and employees of Beijing Pangu Investment Co., Ltd, on suspicion of duty encroachment and misappropriation of funds. On the same day, Kaifeng City People’s Procuratorate in central China’s Henan Province also initiated a public prosecution against Guo’s Henan Yuda Real Estate Company and its employees, on charges of defrauding loans and bill acceptance.

Guo’s US attorney, David Boies, who is known for successfully representing the US Justice Department in a high-profile case against Microsoft, warned in a letter dated June 14 that the plaintiffs’ attorney, Kevin K. Tung, made politically motivated, “false and defamatory statements” in a press conference held in New York a day earlier.

Comment: Boies should have gotten a very large retainer paid upfront, and if there is any delay in paying a bill he should immediately cease all work for Guo until paid in full.

President Xi Jinping (習近平) is believed to have flown into a rage and pounded his fist on the table after he was briefed about Xiao [Jianhua]’s confessions, which depicted massive corruption in the financial sector.

This has directly contributed to Xi’s determination to clean up the financial sector. The first sign of that emerged on April 25 when Xi chaired a study session on financial security by all the Politburo members, the first time that such a session was devoted to the subject.

Comment: Interesting video chat from Ho Pin of Mingjing. The discussion focuses on the Xiao Jianhhua case, in the video Ho says Yu Zhengsheng “suggested” the corruption crackdown in the financial sector. I had heard the same, from a very good source, that Yu brought it up to the PBSC asking something like “why has that sector not been touched?”. That is a very awkward question for Wang Qishan, who has cronies scattered throughout the financial sector, but who mostly left the financial sector alone for the first four years of the corruption crackdown.

3. Does Beijing Have More Resolve Than In Years Past To Tackle The Mess In The Financial System?

Chinese banking regulators are giving banks up to two months of extra time to submit self-check reports of risky exposure, highlighting the challenge authorities face in stepping up efforts to deleverage the financial system without creating a credit crunch.

Mr. Trump’s gamble was based on his calculation that Mr. Xi, the Chinese president, could put heavy pressure on North Korea to curb its nuclear weapons and missile programs. To secure Mr. Xi’s cooperation, the president soft-pedaled his harsh stance on China’s trade practices, and has said little about its adventurism in the South China Sea.

But a growing number of Mr. Trump’s aides fear that the bet is not paying off.

China has not significantly tightened the pressure on North Korea since Mr. Trump met with Mr. Xi in Palm Beach, Fla., in April. Its failure to do more has frustrated White House officials, who plan to raise the issue with their Chinese counterparts at a high-level meeting here on June 21.

Ignorant of the long history of the problem, Trump at least brings fresh eyes to it. But he is going to collide with the same harsh truth that has stymied all his recent predecessors: There are no good options for dealing with North Korea. Meanwhile, he is enthusiastically if unwittingly playing the role assigned to him by the comic-book-style foundation myth of the Democratic People’s Republic of Korea.

The myth holds that Korea and the Kim dynasty are one and the same. It is built almost entirely on the promise of standing up to a powerful and menacing foreign enemy. The more looming the threat—and Trump excels at looming—the better the narrative works for Kim Jong Un. Nukes are needed to repel this threat.

So perhaps one should be thankful that the Chinese are now considering cooperation on sanctions, buying time while extracting concessions from the United States on other issues. A war would be much worse. One perhaps should also hope that belief in a Chinese miracle will survive long enough for Trump to learn the lesson his predecessors had to grudgingly accept: The North Korean nuclear problem has no easy solution. In the past it has usually taken a year or two before a new administration came to accept this inconvenient truth.

MR. ROSS: Just about every other country in the world has more protectionist rules than we do. Take China. China has the most beautiful free-trade rhetoric. And those of you who do business either within the country or try to export to it know they are the most highly protectionist of the big countries. So this is nothing new. We’ve been in a trade war for decades. The only difference is now the American troops are coming to the ramparts for maybe the first time…

We generally have two conference calls a day, one early in the morning our time and one late at night with the Chinese. That’s five, six, seven days a week.

The whole fabric of these discussions is different from prior ones. We aren’t interested in great long-winded debates and big ceremonial meetings and big proclamations that have no teeth. We’re interested in very specific, very tangible achievements. And we’re finding a very, very sensible give-and-take with the Chinese right now.

Comment: What are the substantive deliverables for the first 100 day deadline, next month?

The talks in Washington will involve U.S. Secretary of State Rex Tillerson, Secretary of Defense Jim Mattis as well as China’s top diplomat, State Councilor Yang Jiechi, and General Fang Fenghui, chief of state of the People’s Liberation Army, the U.S. State Department said.

The world’s largest trading nation hopes dialog will help ease tensions and aims to make progress on agreements before President Trump visits the country, Wei told reporters in Beijing Monday. Wei is now Vice Chairman of the China Center for International Economic Exchanges in Beijing.

Out of the 40 million people who work for China’s state-owned industrial behemoths, more than 10 million are Chinese Communist Party members. What is more, according to the top regulator of China’s state-owned assets, these enterprises contain more than 800,000 party committees…

Communist Party members at state enterprises form the “the most solid and reliable class foundation” for the Communist Party to rule the country, Xiao wrote in an article published on Friday. [ 深化国企国资改革 做强做优做大国有企业]

Since President Xi Jinping came into power, the Communist Party has been boosting its presence in China’s political, economic and social life. Xi has stressed that it is incumbent upon China’s biggest state-owned enterprises to answer every call from the party.

Some of the universities castigated, including Tsinghua University and Peking University, have academic programmes and research partnerships with prominent western educational institutions. Another, Wuhan University, has a joint venture with Duke University.

The move not only undermined common efforts to confront abuses, but was seen as a blow to the EU’s own record as a defender of human rights. The statement is presented three times a year and often contains criticism that countries are unwilling to raise alone. The 28-nation bloc prides itself on being a beacon of human rights protection, taking a tough stance on issues ranging from LGBT rights to banning capital punishment and upholding press freedoms.

The European Union should cancel its upcoming human rights dialogue with China and suspend the exchange until the meetings can bring genuine human rights improvements, seven human rights organizations said today. The next EU-China human rights dialogue is scheduled for June 22-23, 2017, in Brussels. The organizations include Amnesty International, Initiatives for China, the International Campaign for Tibet, the International Service for Human Rights, Human Rights in China, Human Rights Watch, and the Unrepresented Nations and Peoples Organization.

China Soy Deal Next Month May Be Record, U.S. Trade Group Says – Bloomberg A record commitment would exceed the 13.4 million metric tons China agreed to buy in February 2012, also at a ceremony in Des Moines. Such an agreement this time around would show continued strength in U.S. soybean sales at a time when China’s appetite for the oilseed is showing signs of waning.

China toughens punishment for stock market irregularities – Xinhua From January to May, fines totalling 6.14 billion yuan (about 901 million U.S. dollars) were slapped on law violators in the securities sector, according to the China Securities Regulatory Commission (CSRC). A total of 29 people were suspended from securities business in the five months, the regulator said.

As curbs take effect, preowned home prices fall in top-tier cities – China Daily Recent measures against speculative property investments have begun to have the desired impact of reining in runaway preowned home prices and cooling the transaction frenzy in top-tier cities like Beijing and Shanghai, said analysts. But the unintended side-effect is that demand is shifting to smaller cities where prices of both homes and land are surging.

Risky mortgages threaten Vancouver housing market’s stability | Vancouver Sun As a result of the flood of money pouring from Mainland China into Vancouver real estate in recent years, some financial experts say they believe Canadian banks are directly exposed to shadow lending in China and the risks of so-called “ghost collateral” — meaning collateral that may not exist or is used continuously to secure loans for multiple borrowers. Postmedia confirmed that Canadian banks are allowed by the federal regulator, the Office of the Superintendent of Financial Institutions, to accept collateral from China to secure real estate mortgages in B.C.

Former Oracle board member dogged by links to China-backed chip deal | Reuters The case of Ray Bingham, until recently Oracle Corp’s (ORCL.N) second-highest paid board member and executive chairman at U.S. chip maker Cypress Semiconductor Corp (CY.O), shows how taking advantage of those breaks can backfire. The 71-year old technology veteran helped set up a private equity fund backed by China’s central government last fall. In November, the fund agreed to buy Lattice Semiconductor Corp (LSCC.O), another U.S. chip manufacturer, for $1.3 billion – a potentially lucrative coup for Bingham.

Politics And Law

Do Street Protests Work in China? | ChinaFile Conversation If we learned anything from the Wukan and Shifang protests, it was that offering immediate concession does not mean forgiving defiance. Local governments sometimes tolerate protests to absorb, erode, or suppress the diffusion of discontents and to protect the careers of senior officials. Protests also inform the authorities of the loopholes in stability maintenance or the changes in social expectations. However, when the timing is right, the organizational structure responsible for the mass incident will be dealt with.

传19名武警军级将领一周内被免职 十九大前续打贪Comment: rumors going around that in the space of a week 19 People’s Armed Police senior officials relieved of their posts

Top Court’s Caveats to Drunken Driving Rules Leave Judges, Public Feeling Dizzy – Caixin Global A decision by China’s top court to ease its grip on drunken drivers by introducing exceptions that could allow some to get off the hook without criminal charges has breathed new life into an old debate on which driving behavior constitutes a crime. The move by the Supreme People’s Court comes as courts are inundated with cases, the result of driving under the influence of alcohol being made a criminal offense in 2011. // Comment: Too bad, at least in Beijing the harsh enforcement really did change behavior

CPC official stresses importance of ideological work – Xinhua Liu Qibao, a member of the Political Bureau of the CPC Central Committee and head of the Publicity Department of the CPC Central Committee, made the remarks when attending a meeting on ideological work. While stressing the CPC’s leadership over ideological work, Liu said efforts should be made to guide the ideological work with the outcomes of the Party’s theoretical innovation. 刘奇葆强调 用党的理论创新成果指导意识形态工作

Iran and China conduct naval drill in Gulf | Reuters An Iranian destroyer and two Chinese destroyers are among the vessels that will participate in the exercise, which will take place in the eastern portion of the Strait of Hormuz and the Sea of Oman, according to IRNA. Some 700 Iranian navy personnel will be participating in the drill.

China, Russia held navy drill on Sunday: Xinhua | Reuters A Chinese naval fleet held a scheduled military exercise with the Russian navy in St. Petersburg and Kaliningrad on Sunday in the first of planned exercises this year to strengthen their cooperation, state news agency Xinhua reported.

BRICS meeting highlights climate change, trade, terrorism – The Washington Post The five countries are seeking to further align their views on key issues at a time when President Donald Trump is withdrawing the U.S. from multilateral arrangements such as the Paris climate accords and the Trans-Pacific Partnership trade deal. Chinese Foreign Minister Wang Yi said China in the coming year would look to “expand with more broad and wide-ranging cooperation in areas such as trade and commerce and investment.” CCTV Evening News on Xi’s meeting with them 习近平集体会见金砖国家外长会晤外方代表团团长

China Pushes U.S. Aside in Pakistan – WSJ $$ “China came in when no one else was willing to invest,” said Commerce Minister Khurram Dastagir. The U.S. missed its chance, he said… Much as the U.S. secured the Pakistan alliance with aid to the country’s powerful military, China has made the Pakistani army a beneficiary. Many construction contracts that weren’t given to Chinese firms have been awarded to the military’s engineering arm

US Navy adopts lower-key approach in South China Sea – FT $$ Speaking during a visit to China, Admiral Scott Swift, commander of the US Pacific Fleet, confirmed the policy of talking less about efforts to challenge China’s maritime claims. “I think it’s a very positive step that current policy . . . is that we’re not going to talk about freedom of navigation operations in the South China Sea,” he said in an interview aboard the USS Sterett, a destroyer that visited the Chinese Southern Naval base in Zhanjiang last week.

Destroyer crash offers lesson on sea rules – Global Times So far, there is no official account of the reason for the mishap. But many analysts hold the collision could be caused by operational blunders by the US destroyer. A crash between large vessels is rare, so that a US destroyer was involved in a disastrous collision perhaps is built on the high frequency of voyages US warships undertake in the West Pacific.

Hong Kong, Macao And Taiwan

The World Is Deserting Taiwan. How Should the U.S. Respond? | ChinaFile Conversation Richard Bernstein: American standing as a great power in the Asia-Pacific, our network of alliances in Asia, and our reliability as a strong, non-intimidated ally require us to do what Beijing refuses, which is to acknowledge and respect the preferences of the 22 million people who live on Taiwan. But this is the era of Donald Trump. If Germany’s Angela Merkel no longer feels that the United States can be relied on, what reason does Taiwan have to feel confident the United States has its back?

Tech And Media

Mobike Fills Its Baskets With $600 Million in Latest Fundraising Push – Caixin Two years after Beijing Mobike Technology Co. obtained its first 1.5 million yuan ($220,000) in funds from angel investors. it recently raised $600 million from Tencent and state-backed BOCOM International, ICBC International Holdings and others. The money will help pay for its expansion into cities outside of China, as well as for research and development. // Comment: Who were the angel investors?

China’s Biggest Gaming ‘Whales’ Are Werewolves — The Information In China, “Werewolf” has become a hugely popular mobile game with a growing community of fans who spend money and support professional players. Millions have signed up to the dozens of different “Werewolf” gaming apps or to watch live-streaming broadcasts of games played by celebrities like Mr. Jiang.

Hackers May Have Access to Your Baby Camera, Says Government – Sixth Tone State broadcaster China Central Television also ran a story on Sunday about surveillance technology being vulnerable to hackers. With simple scanning software, cameras’ internet protocol (IP) addresses can be easily cracked, CCTV reported, with hackers being able to access the streams at will.

Energy, Environment, Science And Health

Seven Imprisoned for Stuffing Cotton Into Air Pollution Monitors to Skew Readings – Caixin The official and four staffers were charged with falsifying computer data. He told the court that he was under “immense pressure” because performance reviews of environmental protection officials were closely tied to fluctuations in pollution readings. He instructed subordinates to do “whatever it took to lower air pollution readings” and had turned a blind eye after learning about the irregularities, according to court papers.

别了，狗日的科研Comment: A long rant, purportedly from a chemistry professor at Tianjin University of Science and Technology，about the very dysfunctional state of scientific research after years of frustration with the research grant process

Education

China launches crackdown on academic fraud – FT $$ China’s ministry of science and technology said this week that the incident had “seriously harmed the international reputation of our country’s scientific research and the dignity of Chinese scientists at large”. It vowed a “no tolerance” approach to academic fraud. The government pledged to investigate the papers’ authors and may strip them of their academic roles. All grant funding to the academics involved has been halted

Beijing

New Beijing Chief Vows to Finally Win Fight Against Pollution – Bloomberg Cai Qi, the Communist Party chief in the capital, told a gathering of local delegates Monday that the metropolis of 22 million must slash pollution levels to “win the battle against pollution.” He pledged to cut levels of the most hazardous airborne particulate by 30 percent over the next five years, while pushing polluters and “non-essential” services out to “display the image of a major country’s capital city.” 中共北京市第十二次代表大会开幕 蔡奇作报告

Amazon: Beijing Smog: Ian Williams Set in contemporary China, Beijing Smog is a novel about deception. It is about the power of online ridicule and rumour in a society where truth and reality are about as clear as the thick smog, beneath which corrupt politicians struggle for power, spies stalk cyberspace, and a bubble economy is about to burst.-Ian Williams began his journalistic career covering business for the Sunday Times before becoming a Foreign Correspondent for Channel 4 News in Moscow, Hong Kong and Bangkok. For the last nine years, Ian has covered Asia and China for NBC News